Lux Industries Limited

LUX INDUSTRIES LIMITED A Market Disruptor in the Indian Innerwear Industry Lux Industries Ltd. (‘the Company’ or ‘LUXIND’) is one of the leading companies in the Indian Innerwear Industry involved in the manufacturing of both men and women’s hosiery products with a dominant share in the domestic market and a growing export presence. The Company provides its customers a diversified product portfolio of more than 100 products spread under 15 brands for men, women, and children ensuring relevance across ages, geographies, genders, and seasons. A testimony to the consumer’s preferences, Lux provides more than 5000 SKUs (Stock Keeping Units) across a varied range and sells 2000 pieces every minute to its customers. It is India’s 1st ranked Company in terms of volume and is also the innerwear export leader in our Country. How did Lux Industries Emerge as a Domestic Leader? Lux was founded in the year 1957 by Mr. Girdhari Lal Todi by establishing the Biswanath Hosiery Mills to make innerwear comfort a reality for Indians. The Company was managed by the second generation of entrepreneurs who laid down a vision of being recognized as the best Indian Hosiery Company globally, by ensuring superior customer satisfaction, developing top-notch products by delivering innovation, and adhering to the highest ethical standards in its business dealings. Since then, the Company has embarked upon significant milestones. In 1993, Lux began to export its products to the Middle East, Africa, and Europe. It also launched its IPO in the year 2003 and got its shares listed on the Calcutta and Ahmedabad Stock Exchanges. The shares were massively oversubscribed by the public. The undergarments 1 | P a g e www.leveragedgrowth.in manufacturer offered 2 million shares of Rs.10 each at a premium of Rs. 40. The Company’s shares got listed on NSE on Dec 1, 2015, and on BSE on Jan 5, 2016. Lux has been one of the most aggressive brand builders in India’s Hosiery Sector and has always invested a significant proportion of its revenues on branding. Lux has based its business model on the principles of ● Rich Experience ● Competitiveness ● Diversified Product Bouquet ● Extensive Scale ● Robust Balance Sheet Ashok Kumar Todi, Chairman (left), Pradip Kumar Todi, Managing Director (right) About the Indian Innerwear Industry • From a basic requirement of a commodity product to a fashion product with an emphasis on comfort and styling, the innerwear industry has broadened its horizons over time. • Earlier, the innerwear industry was a fragmented space and was dominated by local and unorganized players. The entire industry was highly price-sensitive and people exercised caution in spending on innerwear. However, with rising incomes, higher discretionary spending, and growing fashion consciousness, the market witnessed a change in the trend with the introduction of organized and branded players in the industry. • The current size of the innerwear industry of India is Rs.27,931 crore (which accounts for 10% of the total apparel market) and is expected to grow with a CAGR of 10% to Rs.74,258 crore by 2027. • The men’s innerwear market is expected to grow with a CAGR of 7% whereas the women’s innerwear market is expected to grow with a CAGR of 12%. • The increase in per capita income implies a rise in the purchasing power of the people. With massive economic growth, rising disposable incomes, and higher discretionary spending, there has been an emergence of a middle class that has become more brand conscious and is ready to experiment with fashion and style. Consequently, the per capita expenditure on innerwear is expected to double to Rs.300. • There has been a recent rise of occasion-specific products in the industry for different purposes such as sports, fashion, comfort, casual, etc. Moreover, there has also been a recent uptake of the online retail channels which has led to an increase in sales by targeting fashionable youth without access to retail outlets. Industry Division (%) Men Women Kids 3 33 64 Source: Company, Leveraged Growth 2 | P a g e www.leveragedgrowth.in Industry Movers Lux Industries Page Industries VIP Clothing Dollar Industries Rupa Industries Business Model The key dimensions of Lux Industries are: • Product: It deals in the hosiery sector and has a diversified product line for both men and women ranging from vests, briefs, trunks, boxers, thermal wear, panties, camisoles, leggings, loungewear, t- shirts, and socks. Market Segmentation (%) Premium Mid-Premium Economy 21 33 46 Source: Company, Leveraged Growth • Value Chain: The Company has a total of 6 plants spread across 3 states namely West Bengal, Punjab and Tamil Nadu. It has strong control over its value chain, having its 100% in-house manufacturing plant with no outsourcing for any of its products. Along with that, it targets its customers through various third-party distributors and retailers. It also operates via self-owned exclusive retail outlets 950+ Distributors 9 160 Exclusive Brand Formal Stores Outlets 3 | P a g e www.leveragedgrowth.in and large format stores. The Company has over 950+ distributors, 160 large format stores and 9 exclusive brand outlets across India. Manufacturing Process Yarn Knitting Processing Cutting Stitching Packaging • Geographies: It has a Pan-India presence with major sales from states such as Madhya Pradesh, UP, and Uttarakhand. Moreover, it also has a strong export market and serves more than 47 countries, having generated a revenue of Rs.133 crore from exports in FY20 (~11% of the total revenue). Impact of COVID-19 on the Company The entire hosiery industry had a huge hit due to a complete closure of the various retail marketplaces throughout the Country. India went for a complete lockdown on the 23rd of March, 2020 shutting the Company’s operations globally. However, it resumed its operations from May 2020 at lower capacities due to logistics and labor constraints. Despite the ongoing crisis, the Company has been able to reduce its overall working capital cycle. The revenue of the Company has declined by 12% YoY in Q1FY21, however, the domestic market has seen good traction in terms of sales for the Company since May and June, 2020. The Company’s exports experienced a huge hit due to the various global restrictions being imposed. Currently, the Company has been able to resume its operations in full capacity. 4 | P a g e www.leveragedgrowth.in Differentiating Strategies 1. Diversified Product Portfolio with the Widest Price Range throughout the Industry LUX Industries has ensured to cater to a wide audience across the distinct mass, semi-premium, and premium Price Range: Rs.35- segment by launching its products for all the consumer Rs.1350 segments. It offers more than 100 products across 15 brands and are available at a price range of Rs.35 to Largest Vest Rs.1,350, widest throughout the industry. Consequently, Brand in 100+ Lux also deals across all categories in the innerwear Economy Products industry and produces products in Men’s and Women’s Segment Innerwear and Outerwear segment and also other complementary products such as socks and children’s wear. In the mid-premium and economy segment, Lux Cozi has emerged as the strongest and fastest-growing men’s innerwear brand and additionally, Lux Cozi Bigshot is one 5000+ SKUs 15 Brands of the most preferred brands in the boxer/brief segment. 2. Continued Momentum of Innovative Product Introduction LUXIND has kept a vision of launching brands in every product category. In 2005, LUXIND introduced two products in the thermal category since this segment was under represented by branded players. While the competitors viewed “2” products in the same category as a foolish move, LUXIND ensured to position them distinctly at varied prices and hence, won over the market while capturing a larger market share in this segment and reporting revenue growth of more than 50% in FY19. In 2012, the Company came up with Lyra as a leggings brand, a strategy to capture the unorganized market by introducing a differentiated category. Simultaneously in 2017, it planned to extend Lyra from leggings to lingerie, a segment where the Company possessed no experience at all, however, the rapidly growing women’s innerwear segment enabled LUXIND to target its product towards the class audience and not the mass by pricing it mid-level and hence, winning over this product segment as well. Traditionally, vests are always appreciated for their softness, smoothness, and whiteness, however, recently, in April 2019, LUXIND came up with a unique dimension of a scented vest in order to address a long-standing need by introducing a pre-scented product in order to cater to the problem of sweat and odour in the body which witnessed a successful response with a 20% volume growth in Q1FY20. Lux Lux Onn Lux Cozi Lyra Inferno Premium Scented Leggings Thermal Wear Vest Wear 3. Increased Focus towards Premiumisation Over the last few years, the Company has altered its product portfolio through a continuous increase in the number of premium products. Catering to the changing demands of the innerwear industry and serving the increasing consumer aspirations and spending on fashion, lifestyle, and comfort, the Company increased its brand spending and launched GenX and ONN for the mid-premium consumer segment. Currently, ONN is growing at of 20% YoY. The Company recently acquired the manufacturing and 5 | P a g e www.leveragedgrowth.in marketing right of One8, a premium brand owned by Indian Cricket player, Virat Kohli, to grow its share in the segment. When the entire population is evolving with greater product aspirations, this opportunity will help the Company capitalize more easily. The Company’s mid-premium portfolio in proportion to its overall portfolio has also increased and is growing at twice the rate of the overall growth rate along with a greater profit margin, further expanding the scope for prolonged profit growth in the near future.

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